✈️This is Your One-Way Ticket To Financial Freedom Plus 5 Tips on how to Get there!

Investing is how you get from where you are now to where you wanna be. Transforming every pound into a magic worker working for you 24/7 with you as CEO. Financial freedom won’t come about from having money stashed in your bank account, gathering dust. It needs to be working.

The thing is, investing is overwhelming for a gazillion reasons. You don’t need me to tell you that! (Psst: read here how to put your confidence back into your finances). And given the fact that everyone thinks the stock (and housing) market is hanging by a thread. 40-year-high inflation and 15-year-high interest rates kinda have that effect! Up until now, earnings haven’t been too bad – yes, it’s earnings that drive share prices not the other way round! But there’s a real fear things could take a U-turn later in the year.

But if you zoom out, none of this really matters if you’re investing for decades not days. Want some proof? Had you stayed in stocks from 2007 till now; you’d be doing just fine. In fact, had you held the S&P 500 from Jul 2007 till now, you’d be sitting in on a +180% return. Read here how you can unlock the power of investing!

You have to take the highs and the lows

When it comes to stocks, and any other investment for that matter, there will always be highs and lows. Life isn’t about to go handing out free stuff. You gotta work for it. Nothing comes without hard work nor without ups and downs. It’s part of the journey. Read here the hidden price you’ve gotta pay to get the rewards from investing.

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And if you want a shot at freedom – real freedom – then you gotta grow nerves of steel and learn to treat the lows as your best friend. Market lows give you a chance to top up on your favourite holdings (or on everything!) and buy things on the cheap(er?). But in the heat of the moment that’s not what happens.

The highs remind you that nothing lasts forever the lows humble you making you realise nothing is ever 100% guaranteed. Not in the market and not in life!

But before you jet on your journey to financial freedom, you need to set out:

  • You goal(s)
  • Your time horizon
  • Your risk appetite  

There’s really no point investing without having a clear goal in mind! It’s like driving without a destination.

Are you investing for your very own crib? Maybe planning for retirement? Or perhaps you’re investing to generate some passive income for yourself?

Whatever your reasons for investing, it will determine a) how long you’re invested for and b) your risk appetite. These go hand-in-hand since (generally speaking!) the longer you’re invested for the more risk you can – and should – afford to take on to boost your overall returns. Read here why more risk = more reward and my unusual journey with start-ups!

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If you’re investing for a house, you don’t want your entire deposit to be sitting in the stock market (a risky and uncertain place). You’ll want a nice chunk in cash. I know you want this deposit to stretch farther and investing can certainly plump it up quite a bit but there’s also a downside to this.

Hear me out: Imagine if you had £50k in the stock market (2 years before you plan to buy a home) then comes a whopping bear market. Your deposit will shrink. A lot.  My friend wants to buy her own pad in a year or so, so she cashed out her chips. She ain’t leaving anything to chance!

Only investing what you can afford to lose is to be taken literally. If you simply cannot afford to lose 20% of your precious deposit, don’t go investing it all. 

The closer you get to buying a home, the greater the slice of your portfolio will be in cash. This is to protect your deposit against a market correction right before you need the money meaning that you won’t have to sell any assets on the cheap. Trust me, no one wants to do that. 

What’s time got to do with it?

If you are investing for 5 years vs 50 years your investment approach will be totally different! Investing for over half a century means that you’re not only able to afford to dip your toes into riskier areas but you’ll have the luxury of time to be able to dive right in. Areas like vc, crypto and alternatives (think classic cars, wine, watches and real estate) will be a savvy move since you’ll have a great stretch of time ahead of you.

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See, with 5 decades ahead, any bumps in the road will hopefully have been smoothed out but 5 years is generally too short a period to take on riskier punts. The rule of thumb goes like this: the longer you’re investing for the more risk you can afford to take on.

How much risk can you handle? 

Your risk appetite is how much risk you’re willing to take. And how much risk you can actually afford. Think of risk on a scale with crypto being very risky and cash being the least risky. Riskier assets will experience huge swings in their share prices whereas assets that are far less risky don’t tend to wobble in price all too often. But naturally, these areas won’t grow our money like we need it to.

Your risk appetite will depend on a cocktail of factors: your time horizon, your goals, your gender, your upbringing and your attitude toward money, among others.

Here are 5 golden rules when it comes to investing:

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#1 Have a long-term vision. Investing is not a get-rich-quick scheme. It takes a great deal of time and patience. Nothing worthwhile comes easily so keep your goals in mind and let markets do the hard work.

#2 Don’t try to time markets. Stick to your plan and don’t try and outsmart them. You could get burned. No one knows when markets have hit the bottom nor when they’ve peaked. Which bring me onto #3.

#3 Focus on time in the market not timing the market. Time is your greatest asset so use it to your advantage. By investing consistently over a long period of time you’ll be able to generate those handsome returns.

#4 You don’t have to invest everything all at once. If prices are making you nervous, why not invest a little every month? This smooths out returns and takes advantage of what’s called pound-cost averaging. By drip-feeding money into the stock market it will average out the price you pay for each investment, lessening the obsession with highs and lows. A happy middle ground.

#5 Block out the noise. The world is a loud, crowded place, especially when it comes to investing. Too many people get swept up in the short-termism that can steer them off course. Yes, markets will definitely take a hit from time to time but that shouldn’t change your investment approach nor your attitude toward investing.

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No two portfolios will look the same. Nor should they! Some will hold 100% in stocks (high risk, high reward) whereas others will be mainly in bonds (low risk, low reward) and that’s normal.

We all have different goals for investing and that will dictate the level of risk we take. More risk = more reward but be sure that you’re comfortable with this level of risk and that you can afford for your portfolio to take temporary hits. Don’t invest what you can’t afford to lose. So choose carefully.

Putting money aside and investing for your future shouldn’t stress you out. It should be an enjoyable experience. Knowing that your money is working for you without you doing anything is one of the best feelings.

This should grant you some peace of mind as well as a security of sorts. And spending along the way can definitely help – read all about what money is really for, here!

Happy Investing!

Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.